Labour & Employment Law Blog

A layoff still constitutes constructive dismissal at common law even if implemented for COVID-19 related purposes

A layoff still constitutes constructive dismissal at common law even if implemented for COVID-19 related purposes

We have stated in former blogs that an employer cannot simply “layoff” an employee (i.e. put the employee’s work on hold) without it being considered a form of constructive dismissal, which would entitle the employee to pay in lieu of notice at common law. An employer can only layoff an employee usually if an employer has an express or implied contractual right to do so. If the employer has such a right, it can only exercise it within the legislated parameters of the Employment Standards Act, 2000 (“ESA”).

In late May 2020 the Ontario government began to complicate the above state of affairs by bringing into law regulations with respect to temporary layoff provisions. The changes essentially meant that if an employer laid off an employee or reduced the employee’s pay or work hours due to reasons related to COVID-19, the employee would be placed on a deemed leave of absence subject to a commensurate right of reinstatement. This would mean that the employee would not be able to claim that they have been constructively dismissed for the purposes of the ESA and would essentially have to see if they get their job back. These regulatory developments have seen a few complex amendments which have been extended (for the time being) until July 3, 2021.

Until recently it remained unclear, whether the aforementioned changes applied to the employee’s right to assert a claim for constructive dismissal at common law (i.e. not under the regulatory regime of the ESA) where compensation could be far more significant in any event. Employment lawyers have been sharing their views on the subject matter, however, there was no clear judicial pronouncement in that regard until the decision of Coutinho v. Ocular Health Centre Ltd., 2021 ONSC 3076 where the court sided with the employees. The case had other issues, which are not relevant for the purposes of this blog; what is important is that the court ruled that the relevant regulatory regime did not affect an employee’s right to pursue a civil claim for constructive dismissal against an employer at common law under the circumstances of the case.

Our Thoughts

The takeaway from the above decision is that now there is actual legal authority that stands for the proposition that companies who have unilaterally laid off employees due to COVID-19 without the employees’ consent and/or without having a contractual right to do so may be facing civil actions for constructive dismissal. This is notwithstanding the fact that the Ontario government has implemented a regulatory regime that classifies COVID-19 related layoffs as “leaves of absence” for the purposes of the ESA.

In sum, at this point, it remains to be seen how jurisprudence will continue to develop in this important area. What is clear; however, is that there now exists at least one judicial pronouncement on the subject matter.

The above article is for general information purposes only, does not constitute legal advice or create a solicitor-client relationship. Because each case is unique and factually driven, if you have concerns with regard to the foregoing issues, please make an appointment with one of our lawyers or a qualified legal practitioner elsewhere. We represent clients in the Greater Toronto Area including Toronto, North York, Markham, Vaughan, Thornhill, Newmarket, Aurora, Brampton, Mississauga, Barrie, Ajax, Whitby, Pickering and Oshawa.